June 2000 vol2 What's the Buzz? TO MEASURE TRUE IMPACT OF INTERNET ON SALES, TAKE A BROAD VIEW If you're doubting the importance of the Internet sales channel, examine the broad view to see its true impact, says Jupiter Communications Inc.. In 2005, U.S. online consumers will spend more than $632 billion in off-line channels as a direct result of research they conduct on the Web, Jupiter says. That's more than three times the $199 billion Jupiter says they'll spend online. For this reason, Jupiter says business must take a broad view of what constitutes success online, and focus on building an integrated Web presence to capture or influence both online and off-line transactions. (See this week's News Spotlight for research that contradicts sky-high Internet spending predictions.) Web-impacted spending--both online purchases and Web-influenced off-line purchases--will exceed $235 billion this year and $831 billion in 2005, Jupiter says. "Skeptical retailers eyeing fluctuations in the financial market and the increasing failure rates of Internet companies are often blind to the most important issue--specifically, the degree to which their online efforts will affect their off-line business," says Ken Cassar, a senior analyst with Jupiter Communications. "Online consumers are a very powerful audience and tend to be channel agnostic. And as consumers increase their use of the Internet, the opportunity for the Web to influence their online and off-line shopping behavior grows. Simply put, businesses must integrate across channels." Jupiter research shows online consumers don't perceive the distinctions between a company's online and off-line presence: More than 68% of online buyers say they researched products online and purchased them at a physical store; 47% bought via phone. To understand the impact of various channels on shopping behavior, businesses should track customers across channels, Cassar says. "The retailer that does not understand the impact of the Internet on its store and catalog channels is likely to under-invest in the Internet, missing opportunities to capture incremental sales in all channels." A recent Jupiter study shows that only 21% of multichannel retailers have the ability to track customers across channels. ECOMMERCE NUTS AND BOLTS This edition of WebPromote Weekly provides the details on how you can implement ecommerce on your website. And News Spotlight highlights research that refutes the oft-cited predictions of fast and furious Internet sales growth. How To Implement Ecommerce On Your Website Web companies are coming to grips with the fact that the new economy functions a lot like the old one, where only the strongest are likely to survive in a crowded marketplace. Clearly a lot of companies are going to fail. How do you avoid being one of those companies? There are as many hypothetical answers to that question as there are unique challenges to small businesses. But for most companies, to increase the level of sales from their website and facilitate market growth, their sites need to be ecommerce enabled. So, what does it take to become ecommerce enabled, how much does it cost and is it worth your time and money? Presuming you've developed a well-designed website, there are four components of ecommerce to consider: MERCHANT ACCOUNT It's vital that you can quickly accept payment from your customers. If you're planning to only accept cash or checks, you're bound to lose business: A majority of customers prefer to pay by credit card when making online purchases. Credit card transactions account for 88% of online transaction revenue, according to Jupiter Communications. According to Jupiter, credit cards also allow you to: Capitalize on customer impulse buying Improve your website's credibility Provide convenience for your customers Before establishing a merchant account, determine your needs, examine your resources, and identify all options. DETERMINE YOUR NEEDS Merchant account providers charge various rates and fees for their services. All merchant account providers charge a discount rate (a percentage of the amount of the customer transaction), a per-transaction fee and a monthly statement or management fee. Some providers also charge additional fees, such as batch header fees, monthly minimum fees and application or set-up fees. Begin by considering the nature of the products you sell. If they are large and expensive, seek a merchant account that offers a higher flat-rate transaction fee and a lower percentage charge. Even a hefty $1 transaction fee will be far lower than a 2.5% deduction from the charge. Most merchant accounts charge somewhere between 20 cents and 50 cents per transaction with a 1.5% to 3% discount rate. Add to this a few hundred dollars for set-up costs, another $50 to $80 for leasing a terminal or transaction software, and $20 to $50 monthly sales minimum. When talking with your merchant account representative, be sure to ask about any additional expenses like charge-back fees and programming charges. Merchant account providers may be flexible with their fees and charges. If you'd like to stick with your current bank, let them know if you find lower fees elsewhere. They may lower their fees to keep your business. EXAMINE YOUR RESOURCES Different merchant account providers also require distinct purchasing procedures at your site. If you plan to process your orders manually, will a secure Web form be good enough or will your require extensive modifications to your site, including programming code? If you don't program or haven't hired a programmer, you may find some card-processing systems too complex to use. Fortunately, a number of providers are now offering simplified, comprehensive turnkey systems which include a shopping-cart programs, order verification and processing, and automatic emailing of orders. IDENTIFY YOUR OPTIONS You may encounter obstacles to working with some merchant account providers. Some will not accept "high-risk" accounts, a term that usually encompasses adult sites, online casinos, and sites operated by foreign companies. If your business is considered high risk, at the minimum, you can expect to pay higher fees. Also, as a start-up business or an individual with a bad credit history, be prepared to have your financial background probed, and know that you may not qualify for the lowest rates. Fortunately, because of the boom in electronic commerce, merchant account providers are accepting more accounts and the costs to businesses are decreasing. It's also becoming easier for home- and Internet-based businesses to obtain merchant accounts. If you're in the market for a merchant account, you can probably have one by the end of the week. TRANSACTION SOFTWARE The next step is to have an interface for the actual processing of orders. The most common way for a smaller merchant to do this is offline. That is, you download customer orders and then manually process them just as in a brick-and-mortar store. Choices include an electronic terminal or transaction software. It is essential to protect yourself and authorized credit cardholders from any fraud. For security, the software you use should require purchasers to submit detailed information such as address and phone number. Once entered, customer information is sent to an authorization network (an Address Verification Service or AVS), which confirms the validity of the card and billing request by checking the card's registered address. It takes just seconds for the authorization network to process your request. This security measure is important because charge backs for credit card fraud or mischievous behavior can affect your merchant rating and can lead to higher service costs. SECURE CONNECTIONS One of the most overlooked components of ecommerce is the secure certificate or secure connection. If you have ever ordered online you may notice that sensitive information is usually always delivered at a Web address that begins with https://, rather than the standard http://. The "s" indicates a secure server is being used. Secure servers have software that encrypts information being sent through them to keep it safe from hackers. The most common encryption being used is 128-bit. The encryption process makes secure servers process data more slowly, so it may take a few more seconds for a screen to come up or a form to be processed. If your website is virtually hosted, you may have the option of sharing a secure server and a secure certificate. While sharing the secure server helps in reducing your costs, sharing a secure certificate can confuse your customers and cause you to lose sales, because the certificate holder's name appears on the digital certificate. If the certificate holder's name is not your company name, the customer might think that an error has occurred in the transaction and they may revoke their order. Verisign is the premier supplier of secure certificates. SHOPPING CART SOFTWARE Shopping cart software allows visitors to place multiple product orders from your website. While some minor configuration to your HTML and the software is required, once in place, cart software automatically calculates and totals orders for your customers. While there are many shopping cart software programs available and many ways to install them, most must be installed on the same server hosting your site or on the secure order-processing server. Most merchant account providers also provide shopping cart software. Good merchant providers also have the capability to interface the merchant software with any shopping cart on the market. When choosing a shopping cart software package, consider whether the purchase price includes adequate technical support, how much upgrades will likely cost, and whether it comes with additional useful utilities, such as email autoresponders or report interfaces. By Christopher Swift Christopher Swift is vice president of marketing for WebTranz, which specializes in helping companies to securely accept credit cards and checks on the Internet. WebTranz offers solutions to all online payment processing requirements, including options such as real-time credit card payment processing and a sophisticated, yet easy-to-use shopping cart. STUDY REFUTES PREDICTIONS OF EXPLOSIVE INTERNET SALES GROWTH STUDY REFUTES PREDICTIONS OF EXPLOSIVE INTERNET SALES GROWTH A New York University marketing professor says his research indicates the explosive growth in online shopping predicted by many market research firms is overstated. Joel Steckel says online consumer purchasing in the United States will grow about 50% in 2000, 30% for the following year or two, and 20% a year after that. In contrast, Steckel notes that the Gartner Group's Dataquest division projects U.S. online shopping revenues will increase more than 10-fold by 2003. "The rate of [consumer Internet spending], while considerable, may be less than what is currently being predicted, at least domestically," Steckel says. Of Dataquest's projections, Steckel says "it's hard to reconcile those numbers. Those that buy online would have to buy an awful lot more." Steckel is skeptical of many current ecommerce growth projections because many do not include methodological descriptions, are inconsistent with numbers from other sources, or are one-time studies that do not allow for analysis of variables over time. Steckel criticizes other studies because they rely on consumers describing what they plan to do in the future. Steckel's study, on the other hand, used model-based forecasts of online buying and shopping. He says his forecasts use standard marketing methodology applied to data collected from people who tell what they have already done, rather than using a proprietary model or relying on what people say they will do. Other findings of the study: U.S. PC ownership and Internet access are close to plateauing. By 2004, at least 60% of U.S. consumers who have access to PCs will have bought over the Internet.